Michael Connolly

Birmingham, AL (USA)
Role(s):
Founder/Owner/Principal

Varsgen, LLC

Find More Startups Startup
Location: Birmingham
Industry: Software
Year Founded: 2015
Number Employees: 1-10 people
Business Stage: Growth (not profitable)
Entity Type: Limited Liability Company
Description: Overview Online credit card and debit card fraud is a global problem of enormous size and consequence. Varsgen, a SaaS company, detects and prevents online payment fraud. Varsgen has patents in the financial services and cloud security business segments. Varsgen commercialized its technology with a product that detects and prevents online fraud. Online fraud is a major problem. In the United States Card Not Present (CNP) fraud totaled over $8 billion in 2016. Globally CNP fraud is estimated to cost merchants, consumers and the financial payments sector over $20 billion in 2017. Varsgen piloted its technology with a large global merchant and the results were impressive. The merchant avoided $250,000 of fraudulent transactions in the first quarter of its use. Varsgen is now being rolled out to other European markets. Capital Raise and Outlook The Company is seeking growth equity and Founder take out capital. The objective is to raise $1.0 million. The funds will be used to buy approximately 25% of the company at a discounted valuation with the remainder of the capital being used for sales and product development. The investment vehicle will be a convertible note. The controlling members’ financial goal is to sell Varsgen in 3-5 years to a strategic player in the Fin Tech space. The average current multiples of SaaS companies in this sector are 4.9x trailing 12-month revenue or 50+x on trailing 12 month EBITDA. Leadership Varsgen’s CEO is a proven entrepreneur with successful exits. Michael Connolly was the CEO of ElderCarelink when they sold to QuinStreet for an attractive multiple on revenue. He is a former McKinsey and Company associate and Harvard Business School graduate who is passionate about growing businesses. The Varsgen team includes a software team headed up by Michael Hanson and Terry Ray. Terry was CTO of Tri Novus before its successful sale to Temenos. Chuck Carter, Paulo Teixeira, David Short and Steve Bauer help with Varsgen’s growth plan execution given their experience with Varsgen and the online ecommerce payments world. Product Varsgen offers several products that help to detect and prevent CNP fraud. These products include a Varsgen negative database, a real time transaction-scoring tool and an authentication methodology for questionable transactions. These features are powered by a communication platform with patented security features and tokenization. Varsgen charges on a per transaction basis. The software is flexible. It can be turned on our off depending on the country, and payment method. The merchant has the additional flexibility to set his or her own levels of authentication. Sales and Marketing Strategy Varsgen will primarily focus on small to medium sized online merchants. This is a huge market that is underserved by competitors who offer expensive and complicated products. In addition, Varsgen will offer up its solution in the Magneto, Woo Shopping and Shopify eco systems. In addition, Varsgen will attest to partner with payment system gateways. These gateways want to on board more online merchants but they want to make sure that the quality of payments is good; i.e. low fraud risk. Risk Factors As with any emerging growth company, Varsgen faces many challenges and uncertainties. Next Steps We would be delighted to discuss your interest in Varsgen at your convenience. The Company is targeting a August 1st close for this financing. Several of the existing investors will be participating in this round as well.